The Competition and Consumer Commission of Singapore (CCCS) has determined that ride-hailing firm Grab’s acquisition of American rival Uber’s South-east Asian business is an infringement of competition laws.
In a statement released on Thursday (July 5), the CCCS said it has issued a Proposed Infringement Decision against Grab and Uber in relation to the sale of Uber’s South-east Asian business to Grab.
In the decision, CCCS “provisionally” found that the deal led to a substantial lessening of competition in point-to-point transport services in Singapore. The CCCS said taxi-booking services do not provide enough competition, accounting for less than 15 per cent market share of the ride-hailing market.
“CCCS is also of the view that barriers to entry and expansion in relation to the ride-hailing platforms are high due to strong network effects,” the statement added.
This is especially so given that Grab had imposed exclusivity obligations on taxi companies, car rental partners and some of its drivers.
“Without any intervention from CCCS, it could continue to hamper the ability of potential competitors to access drivers and vehicles,”
Thus, Grab would be able to raise fares for riders and lower the quality of its services.
The importance of Competition Laws
Singapore’s Competition Act was enacted to provide a generic competition law to protect consumers and businesses from anti-competitive practices of private entities. It currently has 3 prohibitions:
- Anti-competitive agreements, decisions and practices;
- Abuse of a dominant position; and
- Mergers and acquisitions that substantially lessen competition.
The GRAB-Uber merger falls under the 3rd prohibition, as they are the only 2 major ride-sharing/hailing app companies in Singapore. The acquisition gave GRAB a near-monopoly on Singapore’s market, a position that has great potential for abuse. CCCS noted that it had received numerous complaints from both drivers and riders in relation to an increase in effective prices since the merger.
To counter this, the CCCS is proposing the following:
- Grab removes exclusivity obligations, lock-in periods and termination fees on all drivers who drive on its platform. These include those who rent from Grab Rentals, Uber’s Lion City Rentals or rental partners.
- Grab removes exclusivity arrangements with any taxi or private-hire fleet in Singapore so as to increase choices for drivers and riders.
- Grab maintains its pre-acquisition pricing algorithm and driver commission rates until competition is revived in the market.
- Uber sells Lion City Rentals (or all or any part of Lion City Rentals’ assets) to any potential competitor who makes a reasonable offer, and not sell to Grab without CCCS approval.
It also proposed to impose financial penalties upon the two companies but did not give details on the quantums. The parties have 15 working days to make their representations to CCCS.
Members of the public may give feedback on the proposed remedies till July 19 at www.cccs.gov.sg
The Land Transport Authority (LTA) in a statement on Thursday said it supported the proposed infringement decision issued by the CCCS.
The authority said the proposed remedies were in line with its review of the broader regulatory framework for the point-to-point sector, “which aims to ensure that the sector remains open and contestable and that no single operator dominates the market to the detriment of commuters and drivers”.
Cr: Straits Times
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